Automatic enrolment legislation will affect all employers with at least one member of staff in the UK. An employer’s duties will “switch on” from their staging date. By now, many small businesses have received their letter from the pensions regulator with their staging date. If you don’t know yours yet, please contact us and we can confirm this for you.
Here we summarise the three common situations where we believe there will be NO requirement to set up a pension scheme for automatic enrolment purposes.
Sole Director – no other employees
Many contractors/freelancers will have an existing payroll scheme set up with just themselves in it. This individual is NOT classified as a worker under automatic enrolment (AE) legislation and as such the organisation has no duties and will NOT be required to set up a pension scheme.
Two Directors – no other employees
This will often be the case where there is a partner/spouse involved in running the company/business.
Provided both parties have no employment contract they are not eligible job holders. There is no mandatory requirement for an employer to have a scheme in place although they must action any request they receive should one of the job holders request to opt in.
Note that the employment contract may be verbal, written or implied so this may be more difficult to prove that one does not exist.
One director one employee
This will often be the case where there is a partner/spouse involved in running the company but where they have not been appointed as a company director.
The director will be exempt as an office holder. The company will have auto enrolment responsibilities towards the non director employee regardless of whether this is a company secretary/spouse/partner. However, if the employee’s earnings are less than the trigger level of £10k for 2015 onwards, they are not eligible job holders. There is no mandatory requirement for an employer to have a scheme in place although they must action any request they receive should one of the job holders request to opt in.
How to declare your company as exempt
If one of the above scenarios applies to you then you can apply for exemption as follows:
Email the Pension Regulator on email@example.com and use the following words:
I confirm that (insert name of the company) is not an employer for the purposes of automatic enrolment for the following reason (select from the list below)
- There is only one director and there are no staff OR
- The only people working for the company are directors and none of them has an employment contract OR
- The only people working for the company are directors and only one of them has an employment contract OR
- The company ceased trading on (insert date)
You will need to provide your PAYE reference and the letter code from the Pensions Regulator – please contact us if you are unable to locate this.
How we can help
If you do not use our address as the registered office, you will need to make sure your respond to the staging date letter and provide contact details to the Pensions Regulator.
We can provide your contact details to the Pension Regulator and submit your declaration of compliance for a small fixed fee.
Start preparing now !
Where you have staff and where auto enrolment applies, you should start considering your options. We can put you in touch with experts that can independently review schemes based on the number and age of your staff and financial advisors that can help with setting up schemes. As a NEST connector, we can set up a NEST scheme for you.
Remember – auto enrolment will apply in these situations…
The types of staff that need to be automatically enrolled are :
1. Aged between 22 years and state pension age
2. Working or ordinarily working in the UK
3.Earning in excess of the trigger level which is currently £10k per annum
Further information and common questions regarding auto enrolment can be found here : http://www.thepensionsregulator.gov.uk/automatic-enrolment-enquiries.aspx
Call to action ! – Consider your retirement plan and assess whether this is in a good shape to meet your required future income.
If you are not required to auto enrol yourself/partner or spouse, this is a good opportunity to review what plans you do have in place. Employer contributions made by the company can be made and are tax efficient provided they meet the HMRC test of wholly exclusively and necessarily for the trade.
Use can be made of unused annual allowances for pension contributions.
Assess what current charges and management any existing pension funds you have are subject to.
Advice on retirement planning should be sought from an independent financial advisor. Contact us for a list of who we and our clients already work with.